Delhi High Court
National Highways Authority Of ... vs Emas Expresway Private Limited on 8 November, 2017
$~1
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 08.11.2017
+ FAO (OS) (COMM) 157/2017
NATIONAL HIGHWAYS AUTHORITY OF INDIA
..... Appellant
versus
EMAS EXPRESWAY PRIVATE LIMITED
..... Respondent
Advocates who appeared in this case:
For the Appellant(s) : Mr. Arun Batta, Advocate
For the Respondent(s) : None
CORAM:-
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE SANJEEV SACHDEVA
SANJEEV SACHDEVA, J. (ORAL)
1. This appeal under Section 37 of the Arbitration & Conciliation
Act, 1996 (hereinafter referred to as "the Act") impugns the order
dated 17.04.2017, whereby the petition of the appellant under Section
34 of the Act impugning the majority award dated 31.12.2013 has
been rejected.
2. The appellant had awarded the Contract, for Four Laning
including strengthening of the existing two lane pavement of National
Highway No.2 from Palsit (km 581.457) to Dankuni (km 646) in the
State of West Bengal (known as Durgapur Expressway), to the
consortium of Gamuda Bhd and WCT Engineering Bhd. The
consortium in terms of letter of acceptance promoted and caused the
respondent company as a special purpose vehicle for implementation
of the project.
3. The Concession Agreement was entered into between the
appellant and the respondent on 27.03.2002. The project was awarded
on build, operate and transfer basis on annuity approach. The
concession was granted for a period of 17 years and four months,
which included the construction period of 28 months commencing
from the Commencement Date which was specified as 27.10.2002 and
ending on 26.02.2020 (the Concession Period). The respondent -
concessionaire was required to commence construction works with the
commencement date as 27.10.2002. The scheduled Project
Completion Date was specified as 26.02.2005. The commercial
construction work was to end on start of the commercial operations on
the project stretch. The Commercial Operation Date, as per the
Concession Agreement was specified to be the date on which the
Independent Engineer issues the provisional certificate or completion
certificate in accordance with Article 5.4 of the Concession
Agreement.
4. The project was completed achieving the Commercial
Operation Date on 20.06.2005 i.e. 114 days after the Scheduled
Project Completion Date of 26.02.2005.
5. Disputes arose between the parties, which were referred to
arbitration. The respondent claimant raised claims under seven heads
and the Arbitral Tribunal partly allowed claims in the following
manner.
Claim No. Brief of claim Amount in Rs. In Crore
Claimed by the By Majority By Minority
Respondent Award (in Rs) Award
Concessionaire
(in Rs) (In Rs)
1 EPC Rs. 3,52,97,431/- 0
Contractor's 3,90,99,636/-
prolongation
costs
2 Concessionaire's Rs.1,06,30,100/- 1,03,88,674/- 0
Prolongation
costs
3 Additional Cost Rs. 13,37,82,038/- 6,52,70,424/-
arising from 15,42,36,720/-
Change in law
Cost
5 Interest on Interest @ Claim No. 1 & 5,69,04,713
amounts of 13.5% p.a. from 2
Claims No.1 to the date of (interest only
4 cause of action 5,26,19,086 for claim 3)
Claim No.3
11,83,58,173
(Interest @
13.5% pa upto
date of Award)
6 Reimbursement 1,77,86,305 1,77,86,305 Nil
of Electricity
Charges Plus Interest @
and Plus interest
Cost of Diesel 18% per annum 1,63,12,221
for from
standby the
Generation Sets respective dates (Interest @
supplied during of payment of 13.5% pa up to
operation period the Bills for date of Award)
of the Project Electricity
Facilities Charges and the
supply of Diesel
Electricity to the date of
Charges and the reimbursement.
supply of Diesel
Electricity
Charges
-For the period
Oct 2005 to Dec
2007- Rs.
13,626,630/-
(a) For the
period 1-1-2008
to 31-7-2008-
Rs.3,564,656 (b)
Cost of Diesel -
For the period
June 2005 to
Dec 2007 -
383,178/- (c) -
For the period 1-
1-2008 to 31-7-
2008 -
Rs.211,841 (d)
Plus interest
7 Refund of Rs. 12,69,000 Plus 12,69,000 Plus 12,69,000 Plus
12,69,000 interest @ 18% interest interest
deducted from pa from 14,27,311 14,27,311
1st Annuity 02.09.2005 (interest @ (interest @
payment plus 13.5% pa upto 13.5% pa upto
interest date of Award) date of Award)
Total 38,72,40,239/- 12,48,71,448/-
6. The appellant aggrieved by the award filed the subject petition
under Section 34 of the Act objecting to the awarded amount, which
has been rejected by the impugned order.
7. The impugned order notices that the claims raised by the
respondent were referred to the Independent Engineer by the appellant
for detailed observation. The Independent Engineer made his
recommendations in respect of Claim Nos. 1 & 2 on 16.06.2007 and
Claim Nos. 3 & 4 on 18.06.2007. Clarification was sought from the
respondent in the form of a certificate in support of the amount
claimed, on submission of which, on 13.11.2007 the Independent
Engineer opined that the appellant had to pay to the respondent in
respect of Claim No.6 also.
8. As noticed above, there is a difference of opinion between the
Members of the Arbitral Tribunal in respect of Claim Nos. 1 to 6,
whereas the Arbitral Tribunal was unanimous as regards Claim No.7
and with regard to the rate of interest awarded under Claim No.5.
Though the Majority Award awarded Claim Nos. 1, 2, 3 & 6, the
Minority Award rejected Claim Nos. 1, 2 & 6 and awarded a lesser
amount, in relation to Claim No.3 as compared to the Majority Award.
9. As noticed by the impugned order, the Arbitral Tribunal has
found as of fact, that there was delay of 599 days in handing over the
land to the concessionaire for the interchanges. This was an essential
requirement and obligation of the appellant. The Independent
Engineer in its letter dated 16.06.2007 has opined that the project was
beset by regular forceful protracted stoppages and interruptions of
construction work by local residents bringing up various demands.
The Arbitral Tribunal on scrutiny of the relevant documents found
that "Employer delayed in acquiring land and providing access to the
site required for implementing the project and that the project was
affected by numerous forced stoppages and interruptions of the
construction work by local residents".
10. As noticed above, the scheduled project completion date, which
was specified as 26.02.2005, was prolongated and the actual
completion date as certified by the Independent Engineer was
20.06.2005, thus causing a delay of 114 days in the completion of the
project. The Arbitral Tribunal has further noticed that although land
was to be handed over within one month of the signing of the
Concession Agreement on 27.03.2002, the whole land for the
mainline expressway along with its right of way was acquired only on
24.01.2003. The Arbitral Tribunal has recorded categorical finding of
fact that there was a delay of 599 days (20 months) in the handing
over of the possession of 26.35 acres of land for interchanges at km
602.000 and km 628.00 which was handed over only on 16.07.2004 as
against the stipulated date of 27.11.2002. The Arbitral Tribunal noted
that though the delay attributable to the appellant was 599 days, the
prolongation cost was claimed for a shorter period of 114 days, which
period had already been certified by the Independent Engineer. The
Tribunal categorically held that the delay of 114 days was on account
of the appellant, as the result of which the respondent was compelled
to stay at the site.
11. With regard to the contention of waiver of the right to claim
interest under Section 55 of the Indian Contract Act, the Arbitral
Tribunal concluded that as time was not of essence of the contract,
second part of Section 55 of the Indian Contract Act would be
applicable and not the third part. Consequently, the Arbitral Tribunal
held that the respondent would be entitled to compensation from the
appellant for the loss occasioned due to prolongation without
requirement of a notice. The Arbitral Tribunal further held that the
EPC Contract was a back to back contract with all liabilities,
obligations and rights of the Concession Agreement and further
notices that the respondent Concessionaire had sub-contracted the
construction work of the project to Gamuda- WCT (India) Pvt. Ltd.,
which fact was known to NHAI from the commencement date
throughout. The Arbitral Tribunal further referred to Article 19.3(a)
(ii) of the Concession Agreement, which provided for indemnification
of the Concessionaire against third party claim for loss, damages and
expenditure arising out of breach by NHAI.
12. The impugned order notices that the conclusions of the majority
award are based on the record as well as certification of Claim Nos. 1,
2, 3 & 6 by M/s K.L. Chatrath & Company and further the Certificate
dated 03.04.2007 of M/s KRAG & Associates, Chartered
Accountants. As there was variation in the prolongation costs in the
report submitted by both the parties, the 10% additional sum included
in the certificate issued by M/s KRAG 7 Associates was found to be
not justified and rejected. On this basis he said, an amount of
Rs.3,52,97,431/- was allowed.
13. Claim No.2 pertaining to Concessionaire's claim relating
prolongation costs to the tune of Rs. 1,03,88,674/- was found to have
been certified by M/s K.L. Chatrath & Co. and accordingly the
Arbitral Tribunal allowed the said claim in favour of the respondent.
The impugned order notices that the appellant has not been able to
substantiate that the finding recorded by the Arbitral Tribunal is
contrary to the evidence on record or perverse. On this ground learned
Single Judge declined to interfere with the award in respect of Claim
Nos. 1 & 2.
14. With regard to additional costs arising from change in law, the
impugned order held as under:-
"29. Turning to Claim No.3 which was for additional
cost arising from change in law whereby the revised
figure claim came to Rs. 154,236,720/-, the majority AT
has discussed the relevant Article 11 as well as Articles
11.1, 11.2 and 11.3 which provide for reimbursement.
The majority AT found that the Respondent had claimed
reimbursement of additional cost in accordance with
Article 11.2. The majority also examined the certificate
dated 12th August, 2008 and affidavit dated 29th June,
2009 of M/s KRAG & Associates. The affidavit of Mr
Abhijit Ghosh and the above certificate formed part of
the evidence.
30. It was concluded by majority AT, that the Respondent
had fulfilled its obligations and followed the procedure
under Article 11.3(a) & (b). It was also found that no
discussion was held by NHAI or the Concessionaire
along with the IE on the subject pursuant to Clause 11.3
(b) for certification by IE and determination of the
additional cost to borne by the Respondent. The majority
AT found that the large number of vouchers submitted
could hardly be doubted.
31. Under Article 11.1, taxes and levies if any payable in
an accounting year and the increase in expenditure had
to be borne by the Respondent. The remaining was to be
compensated by NHAI. However, any increase in cost to
the EPC Contractor/Concessionaire on transportation of
stone due to change in law could not be accepted.
Therefore, the amount of Rs.1,48,88,267 was "not found
to be admissible". The majority AT also discussed the
increase in the minimum wages and accepted the
recommendation for reduction of 25% of the said amount
of Rs. 17,55,704/-. Ultimately, it was found that as
against a sum of Rs.15,42,36,718, the amount awarded
the Respondent a sum of Rs.13,37,82,038/-.
32. The challenge to the majority Award is basically
on the same grounds urged before it by the NHAI.
The Court is unable to be persuaded to interfere
with the impugned Award insofar as it has allowed
Claim No.3."
15. We do not find any infirmity with the view taken by the learned
Single Judge and find no reason to interfere with the impugned award,
insofar as it allows Claim No.3.
16. Claim No.4, pertaining to financing cost, has been rejected by
the Arbitral Tribunal unanimously. Learned Single Judge has not
found any reason to interfere with the said finding. The said finding is
not even impugned by the respondent. Accordingly, the same is not
interfered with.
17. With regard to claim of interest claim under Claim No.5, it is
noticed that the Arbitral Tribunal has referred to Article 19.2 and
Section 31(7) of the Act and has gone by the prime lending rate fixed
by the Reserve Bank of India. 2% above the prime lending rate was
considered by the Arbitral Tribunal to be reasonable, consequently
holding that effective rate of interest to be 13.5% p.a. As noticed
above, the Arbitral Tribunal is unanimous with regard to the rate of
interest. We find no reason to interfere with the same.
18. With regard to Claim No.6 i.e. for reimbursement of electricity
charges and cost of diesel for standby generator sets supplied during
operation period of the project facilities, the Arbitral Tribunal after
considering the correspondence between the parties at some length
has held the respondent entitled to reimbursement on account of
electricity charges and cost of diesel for operation of the project
facilities. We find no reason to interfere with the impugned order
declining to interfere with the said finding of the Arbitral Tribunal.
Further, the said finding is purely factual in nature not warranting any
interference.
19. With regard to Claim No.7 for refund of the deduction made by
the appellant from the first annuity payment, the Arbitral Tribunal has
held that the same was without any justification and not as per the
terms of the Concession Agreement. No clause was pointed out in the
Concession Agreement for any appropriation by the appellant from
the annuity payment. There is also no term for any reduction from the
amount payable or any imposition of penalty, token or otherwise. The
Arbitral Tribunal found the said deduction was beyond the scope of
the Concession Agreement. The finding is purely factual and does not
warrant any interference in exercise of powers under Sections 34 or
37 of the Act.
20. It is noticed that the findings rendered by the Arbitral Tribunal,
which are impugned by the appellant, are purely factual in nature. The
interpretation to the various clauses as noticed hereinabove is a
plausible interpretation rendered by the majority Arbitral Tribunal not
warranting any interference.
21. The Court in exercise of powers under Section 34 does sit as a
Court of Appeal and is not required to re-appreciate the entire
evidence.
22. In view of the above, we find no infirmity with the factual
findings returned by the Arbitral Tribunal and its interpretation of the
terms & conditions of the Concession Agreement. We find no
infirmity with the view taken by the learned Single Judge in the
impugned order and no reason to interfere with the impugned award.
23. In view of the above, the appeal is dismissed, however in the
facts of the case, without any costs.
SANJEEV SACHDEVA
(JUDGE)
S. RAVINDRA BHAT
(JUDGE)
NOVEMBER 08, 2017/km
